Real Estate

You don't save anything as a buyer when going solo?

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  • Aug 4th, 2020 9:20 pm
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[OP]
Member
Feb 8, 2015
320 posts
265 upvotes
Manotick, ON

You don't save anything as a buyer when going solo?

Everyone knows that even though buyer doesn't pay realtor fees (seller does) that cost is baked into the price that the buyer pays.

Let's assume a $500,000 house as a buyer without a realtor, you get 2.5% kickback: $487,500

So after 20% down, it becomes $400K mortgage vs $390K mortgage. (Assuming 2% rate)


$400K mortgage = $1692 per month

$390K mortgage = $1650 per month


You save $42 per month for the 25 years when you buy a home successfully without a realtor.

But is that worth the risk of:
-having not much clue on real markets
-Not knowing how much to bid
-having no clue on real estate buying process
-having no clue on what to look for, etc?

I have been looking for real estate myself but after doing this analytical exercise, I think I am better off getting a realtor since the 2.5% price increase is spread over 25 years which actually doesn't cost a whole lot...

I think as the seller, it is worth going solo because it is straight cash you are getting if you are able to list yourself and do showings yourself.
83 replies
Member
Jan 5, 2020
272 posts
302 upvotes
I think it's better to go solo as a buyer and save the 2.5%. If you know you are looking for, you really dont need a realtor to buy.

However, I would see get a realtor when selling. It's hard to find buyers outside of MLS and chances are you might get a lower selling price. Selling commission is also only 1%
Member
Nov 25, 2009
410 posts
152 upvotes
Terrace
If you go solo as a buyer won't you have to convince the seller to reduce the price too?
Deal Addict
Mar 27, 2004
4255 posts
1845 upvotes
Toronto
Newuserid wrote: I think it's better to go solo as a buyer and save the 2.5%. If you know you are looking for, you really dont need a realtor to buy.

However, I would see get a realtor when selling. It's hard to find buyers outside of MLS and chances are you might get a lower selling price. Selling commission is also only 1%
that is not how it works.

the listing agreeement is between the seller and the listing brokerage. the seller has agreed to pay a total percent to the listing brokerage to find a buyer and pay a cooperating fee %. you going directly doesn't not save you the coop fee. the listing agent will just double end the deal unless the listing agent agrees to this. you are better off getting a realtor to represent your interests and give you a rebate.
Full-time Realtor
Member
Jan 5, 2020
272 posts
302 upvotes
oasis100 wrote: that is not how it works.

the listing agreeement is between the seller and the listing brokerage. the seller has agreed to pay a total percent to the listing brokerage to find a buyer and pay a cooperating fee %. you going directly doesn't not save you the coop fee. the listing agent will just double end the deal unless the listing agent agrees to this. you are better off getting a realtor to represent your interests and give you a rebate.
You should obviously require the listing agent to pay you the 2.5%. This should be detailed in the sale agreement
Jr. Member
Jan 27, 2018
134 posts
69 upvotes
oasis100 wrote: that is not how it works.

the listing agreeement is between the seller and the listing brokerage. the seller has agreed to pay a total percent to the listing brokerage to find a buyer and pay a cooperating fee %. you going directly doesn't not save you the coop fee. the listing agent will just double end the deal unless the listing agent agrees to this. you are better off getting a realtor to represent your interests and give you a rebate.
this is not how it works.

you tell the seller agent to draft the offer, you tell them you'll give the seller agent 0.1% (depending on how generous you want to be) -- then add this as a clause in the offer:

In the "CO-OPERATING BROKERAGE- COMMISSION:" section, add "2.5% of sales price as per MLS minus 2.4% of sale price"
Add additional clause in the "Additional comments and/or disclosures by Co-operating Brokerage:" section, add "The co-operating commission is reduced for the benefit of the seller in this transaction."

source: me, saved commission. the secret is, the seller agent has fiduciary duty to present offer to seller. The seller agent also signs the document (Agreement of Purchase and Sale).


Note, this is better than cash back on commission (no HST for seller, and less transfer tax for buyer).
Member
May 13, 2015
229 posts
164 upvotes
Manotick, ON
Can you explain with numbers how this works?
Sr. Member
Jun 7, 2017
905 posts
645 upvotes
BC
Wrong.
RE agents are a financial drag on the housing economy. Everybody knows this and everybody loses by adding middlemen. Tech is rendering them obsolete as buyers and sellers can find each other easily. What's missing is easy access to comparables and history, but that is coming despite RECO fighting tooth and nail to prevent it.
I will admit that their deathknell has been sounding for some time and that they are not imploding at the same rate as Blockbuster. This is due to the resistance of the heavily backed stakeholders. They've had a good run though. Many a high school grad has made big bucks with a few weeks of cramming for their license.
Deal Addict
Mar 27, 2004
4255 posts
1845 upvotes
Toronto
so much jealousy

if you think its that easy, go get a license .

make the big bucks,
Full-time Realtor
Newbie
Jul 23, 2020
33 posts
22 upvotes
I agree, real estate commission should be reformed.
It's crazy that people are giving realtors 5% commission to sell their house, on a 1M house that 50k+HST, only a matter of time before people realize how shady this is.
Sr. Member
Feb 2, 2007
790 posts
632 upvotes
GTA
garmium wrote: Let's assume a $500,000 house as a buyer without a realtor, you get 2.5% kickback: $487,500

So after 20% down, it becomes $400K mortgage vs $390K mortgage. (Assuming 2% rate)

$400K mortgage = $1692 per month

$390K mortgage = $1650 per month

You save $42 per month for the 25 years when you buy a home successfully without a realtor.
Such shady math! :twisted:

First, the difference is $12,500.
You try to obfuscate that by forgetting the initial need for a higher down payment, 20% of $12,500, i.e., $2,500 and you magically shrink it to $10k ($400k vs $390k).
Then you make it sound less by spreading it over 25 years.

There is a saying "a buck is a buck is a buck".

If you were to buy a $500k house (where do you find that, BTW?), and your employer offered you a $12,500 bonus with the condition that you will have to put it towards the down payment, would you do the same calculation as above and say: "nah, but it only saves me $42 per month for 25 years, I'll take a pass, thank you"?
You don't save anything as a buyer when going solo?
No, sir, as per your scenario, $12,500 is a nice chunk of change; it's quite far from nothing.
Deal Expert
May 30, 2005
43936 posts
4564 upvotes
Richmond Hill
deepzerg wrote: this is not how it works.

you tell the seller agent to draft the offer, you tell them you'll give the seller agent 0.1% (depending on how generous you want to be) -- then add this as a clause in the offer:

In the "CO-OPERATING BROKERAGE- COMMISSION:" section, add "2.5% of sales price as per MLS minus 2.4% of sale price"
Add additional clause in the "Additional comments and/or disclosures by Co-operating Brokerage:" section, add "The co-operating commission is reduced for the benefit of the seller in this transaction."

source: me, saved commission. the secret is, the seller agent has fiduciary duty to present offer to seller. The seller agent also signs the document (Agreement of Purchase and Sale).


Note, this is better than cash back on commission (no HST for seller, and less transfer tax for buyer).
I've never heard of it done this way. I'm curious if there's anything sketchy about this. I don't think the seller's agent would be too happy about this, in most cases they would "expect" to double dip on the deal.
Jr. Member
Jan 27, 2018
134 posts
69 upvotes
Jon Lai wrote: I've never heard of it done this way. I'm curious if there's anything sketchy about this. I don't think the seller's agent would be too happy about this, in most cases they would "expect" to double dip on the deal.
this is actually very common, agents prefer this over cashback as well, since the revenue never touches their books.

obviously, seller agent wants to pocket the "full commission", which is ridiculous considering the work they're doing. which is nothing when the buyer finds the place and contacts seller agent directly.
Deal Expert
May 30, 2005
43936 posts
4564 upvotes
Richmond Hill
deepzerg wrote: this is actually very common, agents prefer this over cashback as well, since the revenue never touches their books.

obviously, seller agent wants to pocket the "full commission", which is ridiculous considering the work they're doing. which is nothing when the buyer finds the place and contacts seller agent directly.
What's the benefit for the buyer agent in this method? As I understand it rebates are not taxable so there should not be any financial differences.
Jr. Member
Jan 27, 2018
134 posts
69 upvotes
Jon Lai wrote: What's the benefit for the buyer agent in this method? As I understand it rebates are not taxable so there should not be any financial differences.
there's no buyer agent here -- just seller agent.

it simplifies the paperwork, no need to rebate it later.

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